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Telecoms Deflators: A Story of Volume and Revenue Weights

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  • Mo Abdirahman
  • Diane Coyle
  • Richard Heys
  • Will Stewart

Abstract

Fast-changing technology products present inherent measurement challenges in relation to ensuring that deflators adequately adjust for quality change to allow a like-for-like comparison of volumes of output. Telecommunications services present significant challenges in this area not just because of rapid changes in prices and volumes, but also because the different services provided (text, voice, data) are displaying increasing substitutability. This paper builds on previous work by the authors to provide improved alternatives for telecoms services deflators, calculated for the UK, focussing on whether using revenue-weights or whether using volume weights for fixed components of contract bundles delivers more reasonable results. Our new options deliver declines in the deflator series of between 58% and 84% between 2010 and 2017. These are far faster declines than the deflator calculated by the existing method but considerably reduce the range calculated in earlier work.

Suggested Citation

  • Mo Abdirahman & Diane Coyle & Richard Heys & Will Stewart, 2020. "Telecoms Deflators: A Story of Volume and Revenue Weights," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-11, Economic Statistics Centre of Excellence (ESCoE).
    • Handle: RePEc:nsr:escoed:escoe-dp-2020-11
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    References listed on IDEAS

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    1. Ian Crawford & J. Peter Neary, 2023. "New Characteristics and Hedonic Price Index Numbers," The Review of Economics and Statistics, MIT Press, vol. 105(3), pages 665-682, May.
    2. William D. Nordhaus, 1996. "Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not," NBER Chapters, in: The Economics of New Goods, pages 27-70, National Bureau of Economic Research, Inc.
    3. Diewert, Erwin & FOX, Kevin J. Fox & SCHREYER, Paul, 2017. "The Digital Economy, New Products and Consumer Welfare," Microeconomics.ca working papers erwin_diewert-2017-12, Vancouver School of Economics, revised 14 Dec 2017.
    4. Angus Deaton, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter.
    5. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
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    Cited by:

    1. Diane Coyle & Jen‐Chung Mei, 2023. "Diagnosing the UK productivity slowdown: which sectors matter and why?," Economica, London School of Economics and Political Science, vol. 90(359), pages 813-850, July.
    2. Diane Coyle, 2021. "The idea of productivity," Working Papers 003, The Productivity Institute.
    3. Coyle, Diane & Hampton, Lucy, 2024. "21st century progress in computing," Telecommunications Policy, Elsevier, vol. 48(1).

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    More about this item

    Keywords

    technological progress; telecommunications; deflators;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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